An Overview Of FITWI: A New Regime For Maltese Corporate Tax

FITWI - Maltese Corporate Tax

Malta's company tax system has long been based on a full imputation system. Under this system, a Maltese company pays tax (at the standard 35% rate) on its profits, and any tax paid is "imputed" to shareholders when profits are distributed. In practice, shareholders receive a credit for the tax the company already paid, eliminating economic double taxation. For example, a €100 profit taxed at 35% leaves €65 after tax, and when this €65 is paid to a shareholder the €35 tax can be refunded (via Malta's refund mechanism), effectively reducing the net tax burden.

On 2 September 2025 the government introduced an optional 15% "final" tax on chargeable income (the Final Income Tax Without Imputation regime, 'FITWI'). Under this new regime, a qualifying company can elect to pay 15% on its taxable income, and that 15% is treated as the final tax liability, which means that no additional tax is due at shareholder level and no refunds or credits are available. A special Final Tax Account records any profits taxed at 15% and dividends paid out of that account carry no entitlement to Malta's usual tax refunds. This contrasts sharply with the existing system: once a company opts into the 15% regime, there is no imputation or refund mechanism on those profits.

The new 15% regime is elective. Any Maltese company (or equivalent entity) can choose to enter it by filing a prescribed election form with the Malta Tax and Customs Authority. Once an election is made, it applies to the chargeable income for the year of assessment 2025 (basis year 2024) and subsequent years. The key features are:

• Maltese companies, and bodies of persons or trusts treated as companies for tax purposes, may opt in.
• The respective entity's chargeable income is taxed at a flat 15% rate, and that tax is final – it cannot be credited or refunded to any person
• In effect, shareholders receive their dividends net of all tax. All profits taxed under this regime are credited to the company's Final Tax Account, and any distributions from that account carry no credit or refund to investors

This regime is subject to some exclusions as well, with certain income being carved out. The 15% tax does not apply to:

• dividends received from profits that are not already in the Final Tax Account of another Maltese company, and
• income that was previously taxed at a final rate under another provision (and allocated to the Final Tax Account). In short, intra-company dividends from fully taxed profits are excluded, as are other final-taxed income item.

To opt in, an entity must notify the tax authorities by the required form by the deadline. Once elected, the company must remain in the 15% regime for at least five consecutive years. After that five-year period, the company may switch back to the standard system by notifying the tax authorities; if it does so, it then cannot re-enter the 15% regime for another five years. This lock-in/lock-out rule is intended to prevent frequent switching between systems.

Moreover, one must take note of the EU's Minimum Tax Directive (2022/2523), implementing the OECD Pillar Two ("GloBE") rules, which requires large multinational groups (those with €750+ million revenue) to face a 15% minimum tax in each jurisdiction.

The new 15% tax can help groups with Maltese operations meet the Pillar Two threshold. By paying 15% on Maltese profits, a qualifying multinational can potentially avoid a top-up tax in other countries (since its Maltese profits would already be taxed at the 15% minimum). This elective regime aims to give in-scope groups "the option to subject their profits to the elective tax in Malta to ensure that no top-up tax is due elsewhere"

However, because this tax is elective, its status under Pillar Two is not automatically certain. Pillar Two defines a covered tax very narrowly; since the OECD model rules say a "tax" is by definition "a compulsory unrequited payment to government", an optional levy may raise questions as to whether foreign tax authorities will regard it as a covered tax on profits. In practice, tax advisors caution that companies must confirm with their home-country advisors whether paying the 15% in Malta will be recognized as satisfying the minimum tax in that jurisdiction. If not, those companies could face additional top-up tax abroad on their Maltese income.

The new 15% final tax regime represents a significant shift for Malta's corporate tax system. It preserves Malta's electivity, since companies can choose between the old imputation system or the new 15% final tax, but the choice carries important implications. Under full imputation, shareholders benefit from Malta's generous refund system. On the other hand, under FITWI, they give that up in exchange for a fixed 15% rate and certainty of outcome.

Because Pillar Two compliance hinges on how taxing jurisdictions treat this payment, it is highly advisable for any company electing the 15% regime to seek professional tax advice in its home country. A local advisor can confirm whether the Maltese 15% payment will count as a covered tax on the profits (i.e. already satisfying the 15% minimum) or whether additional tax could be levied at the parent level. Seeking and obtaining this advice up front ensures the election accomplishes its goal and avoids unexpected tax obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.